When Millennials Will Finally Get To Retire

"I’m crossing my fingers for revolution. But also, I’m tired. When do I get to stop checking my email?"
jianying yin via Getty Images

I always imagined I would sooner die than retire. Not because I love work and hate scrapbooking. Just the opposite! But as an oldish member of the youngest working generation, my fantasies of environmental and economic collapse were, until recently, slightly more vivid than my sense of mortality.

Now, the economy is back from the brink, and some of the hapless “millennials” of the public imagination have moved out of their parents’ basements. The lucky ones who have secured gainful employment are inundated with $7 billion worth of digital marketing from banks and investment firms desperate to turn young workers into grownup savers.

But save for what? Without the traditional commitments seen in financial planning commercials -- the daughter learning to ride her bike, the suburban home she’s pedaling away from -- the picture of financial security served up in every third sponsored Instagram is vague. (On my feed recently: a smug blonde clutching a white paper cup of coffee that she has presumably budgeted for or, better, earned with good returns on prudent investments.)

And, in general, twenty- and thirtysomethings pay too much rent and carry too much student debt to put anything away. If Occupy Wall Street didn’t totally radicalize us, it disabused us of the notion that what separates us from personal wealth is our daily latte habit and a bank. Some of the most responsible members of our parents’ generation watched their retirement savings evaporate in 2008, right?

“I’m crossing my fingers for revolution. But also, I’m tired. When do I get to stop checking my email?”

All this amounts to a sophisticated strain of financial defeatism that might explain why, in 2014, Moody’s reported that people under 35 -- myself included -- were saving at a rate of negative 2 percent. But as the days without an apocalypse tick by, it seems more and more likely I might actually get old and need a scrapbooking fund. According to some, the financial and political decisions we make today could precipitate a reckoning in certain corners of the financial services industry, and a more egalitarian way of thinking about financial planning.

If young people have a hard time picturing old age and leisure, it’s not just magical thinking. Retirement is a relatively new concept. The practice of paying pensions to soldiers dates back to the Roman Empire, when -- as after the Colonial and Civil Wars in this country -- it was strategic for the unstable government to keep its deadliest citizens happy.

But social security as we know it was invented by German statesman Otto von Bismarck in 1889 to distract the working class from a burgeoning socialist movement -- and the benefits kicked in at age 65, far beyond life expectancy at the time. And American social security, under constant threat of cuts from Republicans, was never intended to completely fund modern old age, as the millions of elderly Americans living in poverty can confirm.

The condos and cruises of modern retirement were largely funded by defined benefit pensions, which barely exist anymore. Few private companies ensure their workers monthly paychecks from retirement to death, and public pensions are being gutted. Reagan-era power brokers successfully marketed 401(k)s, once an obscure pension supplement for executives, to the majority of American employers. With promises of expert investment in the then-booming stock market (and with disappearance of union adversaries), employers shifted the risk and administrative cost of retirement to employees, improving their bottom lines and creating a cottage financial services industry.

“It’s tempting to imagine sticking around and growing old, Slack-ing and vesting among the snacks.”

People my age -- many of whom are living off sporadic freelance checks or several fast food jobs that pay by the hour -- consider themselves lucky if they have a 401(k), even if their employers don’t match their contributions. But unlike pensions, 401(k)s are voluntary, and the default contribution rates are low. Even if returns are good again, employees can take money out, and to withdraw is human. Nowadays, half of older workers—the first generation of the 401(k) era to retire -- have no retirement savings, according to the Government Accountability Office, and decades to live.

In other words, the conditions for easy, middle-class retirement have all but vanished, and the need for personal savings is greater than ever, even if financial institutions have failed to sell us on it. It’s painful to consider entering a financial relationship with the entities that got us into this mess. When I’m not anticipating oblivion, I’m crossing my fingers for revolution. But also, I’m tired. When do I get to stop checking my email?

* * *

Like most intergenerational conflicts, analysis of America’s 401(k) crisis is laced with judgment. Republicans say old people living off social security failed to take personal responsibility for their retirement, and finance experts say young spendthrifts are delusional. Or else the discussion is weighed down with nostalgia: Remember when companies actually cared about their employees?

Well, no, because it never was that way, says Teresa Ghilarducci, a professor of economics at the New School and the country’s most prominent retirement reform advocate. In public discourse, Ghilarducci explained, employee benefits may take on moral qualities, but capital has always paid labor as little as the market will allow. Wages and benefits -- a worker’s total compensation -- come from the same pile of money.

The best retirement benefits, according to Bloomberg Businessweek, are in utilities, energy and biotech. ConocoPhillips (oil) and Abbott Laboratories (biotech) will still be profitable -- without pivoting -- in 50 years to pay out benefits, and they have healthy competitors fighting for their employees today. The perks arms race of Silicon Valley gets a lot of airtime, but Facebook, Amazon and Yahoo have some of the worst-ranked retirement plans of large American companies.

But then, who needs to retire when they have a cushy tech job? It’s not exactly coal mining. So it’s tempting to imagine sticking around and growing old, Slack-ing and vesting among the snacks.

“Some financial startups are offering planning tools that mimic modern dieting technology.”

In reality, the majority of people don’t retire from their jobs; their jobs retire them whether they like it or not. They get laid off and face ageism during their job searches. Or they get sick or need to take care of a sick loved one. Workers are retired out of information technology and finance (two of the fastest growing sectors) even earlier, says Ghilarducci, because of the bias against older employees and the lengthening hours. Working in these fields -- around the clock, surrounded almost exclusively by other young people -- the only thing harder to imagine than growing old is working forever.

But workplace fatigue might play to young people’s generational advantage, according to Ghilarducci. We entered the workforce amid debates about work-life balance and with no illusions about the stock market. If we admit that retirement funds won’t protect us from poverty, we’ll see how little we’re actually getting paid. We’ll be more honest with ourselves than our parents’ generation was about what we need, including higher wages.

There are some political solutions to the retirement crisis that young people could support with votes and letters to elected representatives. One is expanding social security, which both Democratic frontrunners Hillary Clinton and Bernie Sanders support (though Sanders has challenged Clinton’s commitment to her platform). Another is President Obama’s proposed conflict of interest rule. The Department of Labor wants to ban the people who manage 401(k)s and other retirement funds from earning commissions to put money in riskier funds. Money managers are reportedly “losing their shit” over the proposed rule, and for good reason.

“The president’s rule would extract billions from the finance industry and put it into the pockets of savers, away from capital and finance,” Ghilarducci told me. “Young people should say, ‘You guys had a good a run.’”

* * *

In the meantime, Ghilarducci says people need to save like they’re on their own, in addition to any savings their employers might be facilitating. But unlike every chipper personal finance guru, Ghilarducci is frank about how difficult it is to save -- and not just for young people who don’t have anything or anyone to save for yet.

Savings rates started dropping in the 1980s and, with the exception of a brief spike following the 2008 crash, have been falling ever since. Wages have been kept down while the economy grows, so we have to spend more to maintain our standard of living. The money our grandmothers might have squirreled away is going towards five-figure student debt balances. More than half of Americans have less than $1,000 in their savings accounts.

To fix this, Ghilarducci prescribed a mandatory national savings plan, drawn from our paychecks and managed by federal appointees. The proposal earned her death threats, but she says we need to be forced to save. “Saving is like weight loss,” she told me. You can dress it up in complicated, expensive, branded programs -- restricting certain food groups, intermittent fasting, mimicking our paleolithic ancestors. “But at the end of the day, you need to burn more calories than you consume.”

What I lack in financial literacy, I make up for in dieting expertise. And some financial startups are offering planning tools that mimic modern dieting technology in compelling ways. After about a decade of on and off dieting, the only thing that has meaningfully improved my irresponsible caloric spending is my phone’s step counter. It gives me a passive, slightly abstracted awareness of my budget, so to speak, without the agonizing self-scrutiny of a food diary. Walking to the second closest subway stop every day doesn’t feel like exercise the way an hour on the elliptical twice a week does.

This is the kind of financial planning promised by Digit, an app that connects to your checking account and monitors your cash flow. When you’re a little bit rich -- when your tax refund came back, or you went home for a week -- its algorithm puts away a few dollars and texts you about it. Acorns, another app, rounds up to the nearest dollar on your debit and credit card transactions and invests the change. Level builds a budget and tells you how much is left to spend each day, week, or month. And you can set up automatic payments to robo-advisors like Betterment and Wealthfront, circumventing some the fees, marketing spin and human error of working with a financial planner.

“There’s no app for the wealth gap, student debt or bank fees.”

But what’s most appealing about Digit is its founder Ethan Bloch’s antagonism towards the financial services industry. Digit isn’t an elaborate marketing tool for Bloch’s buddy’s mutual fund. Last month, Bloch, 30, told the hosts of a personal finance podcast that the accountants and banks that gave poor people credit and mortgages before the 2008 crash should be “taken out back and shot.”

Instead of preaching personal responsibility and financial literacy, Bloch argued that irresponsible lending and incentive structures breed bad planning. “We need to design systems with the knowledge we now have about how the brain works,” he said. “People” -- by which he meant banks -- “don’t do that because they can make a lot of money in the short run, taking advantage of the system.”

In this respect, weight loss has even more in common with financial security. A decade ago, the obesity epidemic shared some of the moral contours of the retirement crisis. Obesity -- like our paltry savings -- seemed like an expression of toxic consumerism and poor choices. Then we researched obesity and found that, in a certain genetic and environmental context, human bodies can’t help but become and stay heavy. It wasn’t a question of willpower. The judgmental thin were lucky, rich or both. Like obesity, poverty is inherited and expensive to escape. Research indicates that the brain power wasted being poor -- mentally weighing the allocation of every dollar and every bank fee -- detracts from earning potential.

The well-funded lobbying backlash against soda taxes and Obama’s conflict of interest rule indicate how hard it is to enact a structural solution to help people save. There’s no app for the wealth gap, student debt or bank fees. There’s also no app for being able to afford a smartphone. But for the young, precariously employed, poorer-than-she-feels worker, Bloch’s philosophy is an appealing stop-gap measure: Nonjudgmental about your habits, suspicious of financial institutions and pragmatic about your inevitable, unimaginable future.

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